Report questions value of Maine RPS, governor agrees

The Maine Heritage Policy Center, a conservative think tank, and the Beacon Hill Institute for Public Policy Research recently published a report disputing the benefits of Maine’s renewable portfolio standard (RPS). The report, titled “The Economic Impact of Maine’s Renewable Portfolio Standard,” essentially argues that the RPS program increases costs, lowers employment and fails to substantially eliminate emissions. Although Maine Gov. Paul LePage has spoken out in support of the study, Bob Cleaves, president and CEO of the Biomass Power Association, said he thinks it is highly unlikely the state will actually take action to dismantle the program.

The study makes several claims, including that the RPS will cause Maine’s electrical prices to increase by 8 percent by 2017. The paper also stated that the RPS will lower employment, reduce disposable income and decrease investment. The authors of the paper also conclude that the RPS doesn’t actually eliminate emissions when analyzed using a cradle-to-grave accounting method, which takes into account equipment manufacturing and decommissioning activities. However, the emissions levels of renewable energy are still miniscule compared to coal and gas. Using the accounting method described in the paper, biomass power results in approximately 59.21 grams of CO2 per kWh. Using the same method, a coal plant generates 1,024.59 grams of CO2 per kWh.

“By 2017, this study predicts energy prices will increase by $145 million for consumers, costing the state of Maine about 1,000 jobs. We already pay a statewide total of approximately $220 million more per year for electricity than the national average. This study shows that special interests are hurting Maine’s economy and costing us jobs. We can no longer embrace the status quo,” said LePage in a statement responding to the results of the study.

Cleaves said the new study seems to be a politically-motivated rebuttal of a study published in January by London Economics International LLC. That study, titled “MPUC RPS Report 2011—Review of RPS Requirements and Compliance in Maine,” found that regional RPS requirements and Maine’s strong resource potential encourage investment within the state, as evidenced by 1,250 MW of proposed new generation projects. Assuming renewable energy credit (REC) prices of $24 per MWh, the study also determined that retail rates would only increase 1.9 percent by 2017.

While Cleaves noted that the electrical rates in Maine—and the other New England states—are higher than the rates in other parts of the U.S., he said that premium is not attributable to renewable energy and state RPS programs. Rather, the higher prices are predominantly a function of the cost to transmit and distribute power in the region.

Cleaves also adds that while the RPS have becoming a talking point in the Maine governor race, he thinks there is very little chance that the RPS could be repealed. Prior efforts to repeal the program were rejected by a Republican-controlled legislature, he said. “That tells me that the state, by and large, is very much behind the renewable portfolio standard,” Cleaves continued.

1 Responses

There is another reason that the Maine RPS will probably remain. Maine has a high proportion of its electricity from biomass power plants (21% of Maine's power is from wood). The wood demand for those plants is about 3 million tons per year and they create a market for lower grade wood that would otherwise not exist. A lot of land owners, loggers, and truckers are in that supply chain. If the RPS and the associated RECs were taken away, most of those plants would be challenged financially. The loss of jobs would far exceed the 1000 jobs that the Heritage Policy Center estimates that RPS costs.
Furthermore, as our recent work shows, adding thermal RECs to the RPS will have very significant positive net permanent job impact in a state that sends a billion dollars a year away for heating oil purchases.
According to the EIA, in 2011 Maine had the lowest average retail electric price in New England even with 21% of its power from wood.

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